The Affordability Crisis and the Long Term Impact on Wealth

We hear a lot about the affordability crisis in real estate these days. In fact, it’s probably the biggest trending news item in the real estate world. We know home values have increased significantly since 2020, and interest rates have spiked as well. What we don’t realize is just how profound an impact the current conditions have had on the local real estate market, and how it has shaped people's decisions and choices around their biggest wealth building opportunity.

**FINANCIAL PERFORMANCE OF HOMEOWNERS VS NON-HOMEOWNERS IN CANADA (2000-2023)**

This chart demonstrates the long-term financial performance of homeowners compared to non-homeowners in Canada from the year 2000 to 2023.

Now here’s the key takeaways from this graph:

- Homeowners' Wealth: This group shows a significant and steady increase in wealth over the period, reflecting the long-term financial benefits of owning real estate.

- Non-Homeowners' Wealth: This group's wealth also increases, but at a much slower and less substantial rate compared to homeowners.

Here are some relevant statistics:

- Average Wealth Increase for Homeowners: The wealth of homeowners increased from CAD $100,000 in 2000 to CAD $328,000 in 2023.

- **Average Wealth Increase for Non-Homeowners**: The wealth of non-homeowners increased from CAD $100,000 in 2000 to CAD $152,000 in 2023.

These sources consistently show that real estate ownership is a key driver of wealth accumulation in Canada. Homeowners benefit from property appreciation, tax advantages, and the ability to leverage equity, which collectively contribute to outperforming those who do not own real estate.

Intuitively, we know that owning a home creates stability for families or individuals.

So with all of that in mind - what does the impact of the last 4 years look like in real numbers and examples?

The story so far:

In April 2020, you could buy a detached home in Guelph of decent size and condition for $543,500, and had monthly payments under $2,500/m. Today, that property will cost you an additional $200,000 and your monthly payment will be $4,277/m.

If you elected to wait out the 2020 market because you thought it was too expensive at the time, and had the ability to borrow the amount needed for the mortgage (around $435,000) then, well - your choices of home have drastically shifted.

Today, in 2024, your choice of available homes for that same median price has shifted to condo townhouses or semi-detached homes, and your payment has now gone up to $3,000/month.

For those looking to get onto the property (read prosperity) ladder, the past four years has destroyed the first couple of rungs of that ladder. This means the struggle to get into the market is not only a very real issue, but it will also impact the current generation of entry level buyers in the long term, if they don’t figure out a way to hit that (now higher) first rung.

This situation is not likely to change rapidly. The anticipated interest rate decreases are likely to have the opposite effect & start pushing home values even higher. However, there are always ways to get into the market. Some of them won’t be pretty, and won’t match the mental picture of what a first home should look like. I can assure you that if you can work your way around perceptions and expectations, that the future can still be very bright.

So what will this picture look like in 2028? And how will that impact the choices you decide to make NOW?

Start your process today with a no obligation consultation. Book here.

Have a great weekend!

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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